What Is the Future of Airline Connectivity Post-Connexion?

The untimely but not unexpected announcement in mid-August that Boeing's broadband offering will be scrapped late this year has given pause to the emerging connectivity suitors.

Spring is the time of year associated with renewal, but this year it is the holiday season that will herald regeneration for inflight connectivity. By year end, a host of new services for airline passengers are scheduled to be springing to life. Counterbalancing the arrivals will be the departure of the 800-lb. gorilla of connectivity: Connexion by Boeing.

The untimely but not unexpected announcement in mid-August that Boeing's broadband offering will be scrapped late this year has given pause to the emerging connectivity suitors. "We're a little concerned right now," says Panasonic Avionics Corp. spokesperson David Bruner. "The departure of Connexion signals satellite providers and airlines that there might be issues with the sector."

Analysts differ about the size of the inflight broadband and telephony markets. UK-based Inflight Management Development Center, a consulting firm specializing in the IFE and communications industry, is predicting that carriers will spend $12.9 billion over the next five years for IFE, content and connectivity.

Telecom, Media and Finance Associates has a more bearish outlook: "Projections that inflight communications can become a multibillion-dollar market over the next few years are completely unrealistic," argues Tim Farrar, president of the Menlo Park, Calif.-based company.

Connexion, launched in 2001, had been installed on 156 aircraft belonging to 12 airline customers. The ballpark figure for installationhas been put at around $400,000 per aircraft (ATW, 3/03, p. 46). It offered bandwidth "equivalent to having DSL at the seat" for a flat fee of $26.95 or $9.95 per hr., giving passengers with laptop computers or handheld devices access to the Internet, e-mail and other broadband services such as voice-over-IP via wireless or Ethernet connections during their flights. The company also had 20 government and private aircraft customers for the satellite-based Ku-band service. "The plan is to have the service phased out by the end of the year," says aBoeing spokesperson, adding that there is "no possibility" of an intervention by an investor.

"It was a very difficult business model [Boeing] undertook," says Wale Adepoju, chief analyst and CEO of IMDC. "Though [Connexion's] social and economic contributions are immense, the financial contribution is awful." He adds, "Like most new technologies, it's the second mouse that gets the cheese."

The second mouse in this case is Panasonic, which plans to launch a broadband service by year end. Bruner says the company's offering, announced in April, is "similar to Connexion." It has the benefit of hindsight and more advanced technologies, however. "As a trailblazer,every step was expensive [for Connexion]," he says. "We're improvingevery possible area."

Yet Boeing is not alone in pulling the plug on inflight connectivity. Also shuttering its operations by the end of 2006 is Verizon's Airfone business, which will affect the North American seatback phone service on 1,000 aircraft operated by six US Major airlines. Meanwhile, Cathay Pacific Airways in June terminated its Netvigator Inflight e-mail, a service provided in conjunction with Tenzing Communications,now a part of OnAir, the Airbus-SITA joint venture.

Contenders for Verizon's business could include Aircell and LiveTV, a subsidiary of JetBlue that pioneered live television on commercial transports, both of whom won licenses from the US Federal Communications Commission for the air-to-ground spectrum Verizon is using. Aircell currently provides phone and Internet service to corporate aircraft through a ground network and the Iridium satellite constellation and plans to begin offering both for commercial airlines next year using the newly acquired licenses. It has conducted demonstration flights of the technology but has yet to announce an airline customer. LiveTV furnishes satellite TV and/or radio to a number of carriers. However, US FAA has yet to approve any onboard telephone systems for commercial transports.

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